Saturday, July 30, 2011

On Wednesday I reported on Lodsys's opposition to Apple's motion for an intervention. Lodsys's lawyers clearly put a lot of effort into that pleading, which some others described as a sign of Lodsys being afraid of Apple. In my view, that's an exaggeration. I'm sure Lodsys knows that Apple is reasonably likely to be allowed to intervene, in which case Lodsys appears to be fully prepared to contest Apple's exhaustion theory, but Lodsys tries to nip Apple's intervention in its bud.

After dropping Wulven Games of Vietnam from its app developer lawsuit by not listing it as a defendant in its amended complaint, Lodsys has dismissed another app developer, Richard Shinderman. He was accused of patent infringement with his Hearts and Daggers game for the iPhone. Yesterday Lodsys filed the following notice of dismissal with the court:

Plaintiff Lodsys, LLC ("Lodsys"), pursuant to [Federal Rule of Civil Procedure] 41(a)(1)(A)(i), hereby notifies the Court of its dismissal of all claims in this action between Lodsys and Defendant Richard Shinderman, without prejudice and with each party to bear its own costs, expenses, and attorneys' fees.

The words "without prejudice" mean that Lodsys did not waive its right to file a future lawsuit over the same issue against Richard Shinderman. Since Richard Shinderman had not yet responded to Lodsys's complaint, Lodsys was able to unilaterally dismiss him from the litigation. However, it's more likely than not that this dismissal results from a settlement between the two parties, and if Richard Shinderman is now licensed, then he'll be fine.

A settlement can result in a dismissal with prejudice (barring the plaintiff from suing the relevant defendant over the same matter), but it doesn't have to. Since Lodsys's notice doesn't mention a settlement, it could also have been unilateral. However, it's hard to see any particular reason for which Lodsys might have thought it had a weaker case against Shinderman than against the others. I don't mean to overrate the merits of Lodsys's assertions. I'm just saying that there isn't an obvious technical characteristic that sets Richard Shinderman's software apart from that of the other defendants. Therefore, a settlement is rather likely.

In the event this was a unilateral act by Lodsys, one possible motivation might be that Lodsys wants to reduce the number of "little guys" among the defendants. In its motion for an intervention, Apple had stressed that Lodsys sued small companies and individuals. But if Lodsys had decided to dismiss all individuals from the lawsuit, it would also have dismissed Michael Karr (doing business as Shovelmate).

Absent blanket coverage from Apple (and Google with respect to Android apps), I believe every app developer who signs a license deal with Lodsys on reasonable terms does the right thing for himself without missing out on an opportunity to make the world a better place: whatever happens in the Lodsys case is not going to do away with software patents, or with trolls at large.

App developers weren't the only target audience for Lodsys's assertion letters. Lodsys also wrote to companies accused of infringing one or more of its patents with ad click tracking, questionnaires and live chat. As a result, six companies filed declaratory judgment actions against Lodsys's patents. Companies expecting patent lawsuits in East Texas often launch such pre-emptive strikes so they can litigate in a less troll-friendly district. Four of the six companies filed their DJ actions in the Northern District of Illinois (Chicago and surroundings) because they had seen a LinkedIn profile of Lodsys CEO Mark Small that stated "Greater Chicago Area" as his place of residence, which would (if accurate) give that court personal jurisdiction over the guy.

However, in its replies to those DJ complaints Lodsys claimed that Mark Small actually lives in Oconomowoc, Wisconsin. As a side note, Wikipedia states that "The Wizard of Oz premiered at the Strand Theatre in Oconomowoc on August 12, 1939". At any rate, what matters for the question of proper venue is geography, not wizardry. Oconomowoc is located in the Greater Milwaukee Area rather than the Greater Chicago Area. According to Google Maps, it takes approximately 120 miles (by car) to go there from Chicago.

The U.S. District Court of the Northern District of Illinois granted the four aforementioned companies their request some discovery of Small as far as it is exclusively related to the question of personal jurisdiction. Those parties had asked for the right to take a deposition of Small, and that's what I guess is going to happen soon. While the court order refers to discovery and doesn't explicitly say "deposition", it's hard to imagine how this discovery would work without a deposition of Small.

While Small has refused to answer questions from the media, this means he'll get interviewed by The New York Times, or more precisely, The New York Times Company's counsel.

The most likely scenario is that Small stated his place of residence in a very imprecise form on LinkedIn. In that case, the lawyers of the four companies who sued Lodsys in Chicago made an amateurish mistake by relying on a vague piece of information from a LinkedIn profile, and their clients might in that case pay for that mistake if their DJ action is dismissed or otherwise consolidated into Lodsys's East Texas lawsuit against the six parties that brought DJ actions. Having to litigate in East Texas may or may not be bad in the end but it's clearly what those companies sought to avoid by suing in Illinois first.

In my opinion, those companies should have made more of an effort to find out about Small's actual place of residence. When big companies really want to find out about someone's whereabouts because of a lawsuit, they sometimes even hire private investigators (for example, Oracle hired "private eyes" to hunt down former SAP and now HP CEO Léo Apotheker). Again, it baffles me how someone can rely on a vaguely worded part of a LinkedIn profile. Professionals would have taken note of that information but would have taken it with a grain of salt. They would have seen that the profile mentioned some of Small's former colleagues, which would have been another great starting point for private investigators in addition to all other information available and possible sources of more information.

By taking a deposition of Small, those companies make a last-ditch effort to maybe find a way to prove that Small does at least some business in the Chicago area. Also, even if their lawyers end up embarrassing themselves in terms of having jumped to an incorrect conclusion, they may find legal reasons for which the lawsuit should go ahead in Chicago. But if they had done their homework properly, this couldn't have happened in the first place. I'm skeptical that Small's testimony is going to be productive.

Those fighting Lodsys's assertions should not underestimate a potentially very well-funded troll. I think Apple's lawyers, too, did a sloppy job on their proposed answer to Lodsys's complaint. Even though the consequences of their sloppiness are minimal (if necessary, they can resubmit a corrected answer, while the mistake those other copanies' lawyers made about Chicago and Oconomowoc could enable Lodsys to have the dispute transferred to its preferred venue), it's disappointing that they didn't properly distinguish between iOS apps (to which their license might extend) and Android apps (to which Apple's licenses certainly doesn't extend).

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About Me

Florian Mueller is an app developer who used to be an award-winning intellectual property activist. His 30 years of software industry expertise span different market segments (games, education, productivity and infrastructure software), diverse business models, and technical and commercial areas of responsibility. In recent years, Florian advised a diversity of clients on the patent wars surrounding mobile devices, and on their economic and technical implications. (In order to avoid conflicts of interest, Florian does not hold or initiate transactions in any technology stocks or derivatives thereof, except that he is long AAPL.) He is now developing games for smartphones and tablet computers.